The Islamic Republic of Iran has delivered another sharp blow to the US dollar. The government recently announced that it will no longer be accepting the dollar for trade. Anyone attempting to use the dollar will be barred from passing through import procedures.
This comes as a result of concerns the Central Bank of Iran (CBI) has with the recent fluctuations in the market rate of the US dollar. Countries (including Iran) have been rising to challenge the hegemony of the US dollar for trade. Russia, China, and Iran have been seeking an alternative to the US dollar because of its dictatorial power of international commerce.
The policy became official on Wednesday according to an announcement by the IRNA news agency. The move was kicked off by a letter from the Foreign Exchange Rules and Policies Affairs, Mehdi Kasraeipour, was sent to Ministry of Industry, Mines and Trade informing them of the decision.
Kasraeipour assured the public that this would not have a dramatic effect on traders because there has been little opportunity to use it as a result of the sanctions forced upon the country by the US. As part of the embargo, US banks are barred from carrying out deals with Iran.
He also said that Iranian merchants would have to tell their suppliers to swap the base currency from the USD to any number of other currencies so that the import documents could be accepted at Iran’s entry points.
These merchants would need to specify as well if they would proceed with their payments through banks or currency exchange shops.
This desire to move away from the USD has been in the works for some time. Already Iran has agreements with several other countries for alternative deals using each other’s currencies. Big talks are currently underway with Russia to do the same.
Meanwhile, China is taking further measures to reduce its dependence on US dollars for trade. Beijing’s challenge to the US dollar is taking the form of test runs in yuan-backed oil futures contract trading.
Yao Wei, chief China economist said: “This contract has the potential to greatly help China’s push for yuan internationalization.” She added, however, “its success will hinge critically on the degree of freedom allowed for the capital flows related to the contract.”
Since the 1970s, the global oil trade has been dominated by USD. This has given the US the power to punish or manipulate anyone who dared not follow their foreign policy strategy. The world’s top ten oil producers are fed up with the dollar’s hegemony being used as a stick to enforce US imperialism. These small producers (and larger producer in Russia) want to start using other currencies in order to undermine the power of the US.
If such actions are taken to a great extreme, there could be some serious consequences for the value of the US dollar which has seen some fluctuations as of late.